10/15/2009 @ 11:00AM

Down and Out in Miami

Not long ago boxing promoter turned real estate developer Marc Roberts said this about his friend Harvey Silverman: “Silverman is the best thing that ever happened to me. … I am fortunate and honored to call Mr. Silverman my [business] partner for life.” Today Roberts’ friendship with Silverman is in shambles amid accusations of embezzlement and deceit. Their attempt to develop a nine-block strip of downtown Miami, one of the nation’s biggest urban renewal projects, has stalled. Several banks, including
Deutsche Bank
and
Citigroup
, are after Silverman for $80 million in overdue loans, potentially wiping out what remains of Silverman’s fortune of maybe $300 million in 2007. The saga is another indication of the kind of reckless commercial real estate lending that might be lurking on the balance sheets of big banks.

Silverman, 68, met Roberts, 50, in 1988, when Roberts was trying to raise money for his company, which promoted boxers like Olympic gold medalist Ray Mercer. Silverman had risen to a high position at Spear, Leeds & Kellogg, the New York Stock Exchange specialist firm purchased in 2000 by
Goldman Sachs
. Silverman also made a nice pile from an investment in the maker of Vitaminwater.

In 2004 Silverman and Roberts invested in Miami Worldcenter, which was supposed to convert 25 downtown Miami acres into condos, hotels and office towers. The duo took a 50% ownership that Roberts publicly fronted and Silverman backed with equity, borrowing $80 million on his own personal guarantee. Citigroup, which lent $10 million, called on Silverman to maintain a net worth of $150 million.

But the credit crisis diminished the prospects for both Miami Worldcenter and Silverman’s portfolio. At one point Silverman’s net worth dipped below $150 million, says one lender. The bank loans started maturing this year and have gone unpaid.

With the banks calling in the loans, Silverman earlier this year sued Roberts for fraud in federal court in Central Islip, N.Y. He alleged Roberts raised credit lines at the banks without Silverman’s knowledge and forged signatures, diverting some of the cash to “support his lavish and excessive lifestyle,” by purchasing homes, a Hawaii honeymoon and a Bentley. Silverman sued the banks, too, for abetting the “fraudulent scheme,” which the banks deny.

Roberts contends Silverman knew he was withdrawing money from their joint venture to cover personal expenses. He further claims Silverman concocted the story that he didn’t have permission to borrow the money. Roberts sued Silverman for breach of contract.

The banks say Silverman knew about all the lending arrangements. “I have no idea what Mr. Roberts may have done with the money,” says Kenneth Lapatine, a lawyer for Deutsche Bank, which lent $20 million. “All we want is for the note to be paid.”

So do 20 investors, mostly retirees living in southern California, who lent Silverman and Roberts $3 million in return for a note that yielded 16%. That coupon has not been paid in months.